What Was the Teapot Dome Scandal?

Most Americans have heard of the Watergate scandal of the early 1970s under President Richard Nixon, and many have also heard of the 1980s Iran-Contra Affair under President Ronald Reagan. However, America’s original big federal government scandal goes back to the 1920s. Under President Warren G. Harding, oil leases were doled out thanks to bribery, creating a classic case of corruption. When the news broke, the public was outraged.

What was the Teapot Dome scandal? Did the president know what was going on under his nose? Who took the Fall for the bribery? Check out the story of America’s original federal government corruption case.

By the end of World War I, the United States had fully emerged as a world power. In the twenty years since the rapid US victory in the Spanish-American War, the United States had demonstrated unparalleled economic growth, industrial might, and technological skill. Much of America’s rise in geopolitical power and prestige came from its Navy. The Navy helped surprise and overwhelm the Spanish in mere weeks in 1898, delivering battle-ready US troops to surprised Spanish defenders.

In 1907, US President Theodore Roosevelt sent the new “Great White Fleet” around the world to demonstrate America’s naval power. A decade later, America’s entry into World War I sent military ship-building into overdrive. By the end of the conflict, the US Navy had more than quintupled in size, exceeding 2,000 vessels! Of course, the United States now had to figure out how to sustain its newfound military might. In the new era of mechanized warfare, ready sources of fuel were needed at all times.

Setting the Stage: Warren G. Harding

The background of the Teapot Dome scandal comes from the conservatism of US President Warren G. Harding, a Republican elected in 1920 on a Return to Normalcy platform. Harding’s administration ended the Progressive Era (1900-1920) and set the stage for the Roaring Twenties by cutting taxes on high-income individuals. Unlike his progressive predecessors, Harding was not a very active president. He was widely considered a nice man, but seemed to have few policy convictions and was largely nominated by his party in 1920 as a genial “compromise candidate.”

Unfortunately, Harding may have been too friendly. By 1923, he was plagued with rumors that some political appointees, including Cabinet secretaries, were engaged in corruption. He struggled with how to respond to the allegations, though Secretary of Commerce (and future president) Herbert Hoover urged him to expose them to the public. In August 1923, Harding died of a sudden heart attack while visiting San Francisco, California. Importantly, he was not implicated in the growing Teapot Dome scandal…but he did appoint Albert Fall.

One of several post-World War I issues that Harding dealt with involved oil leases that provided fuel for the US Navy. On May 31, 1921, Harding signed an executive order transferring the oil leases from the Navy to the Department of the Interior. Two oil leases were in California, and one was in Wyoming, under a salt dome that vaguely resembled a teapot. When these oil leases were shifted from the Navy to the Department of the Interior, they could be auctioned off for drilling by private companies.

The executive order had been suggested by Harding’s Secretary of the Interior, Albert Fall, who had been New Mexico’s first US Senator. Once the ink dried on the order, Fall effectively controlled the oil leases. He also happened to be close friends with some oil barons. It did not take long for Fall to accept bribes in exchange for exclusive access to drill on this government-owned land.

Albert Fall, Edward Doheny, & Francis Sinclair

One bribe came from Edward Doheny, a wealthy oil man with wide-ranging operations. Doheny had traveled the Southwest as a young man, doing odd jobs, and struck it rich at age 37 by discovering oil in Los Angeles, California. Within a decade, he could purchase a mansion with gold coins. Flush with cash and looking to expand his oil empire, Doheny had his son deliver Secretary of the Interior Albert Fall a suitcase containing $100,000. This exchange gave Doheny exclusive rights to the government oil leases in California, plus payment to transport the oil to Pearl Harbor, Hawaii for the US Navy.

A larger bribe came from Francis Sinclair, who spent $300,000 to get exclusive access to Teapot Dome, Wyoming. Like Doheny, Sinclair had been a wanderer as a young man, though Sinclair had grown up in affluence while Doheny had been mired in poverty. Sinclair quickly squandered the inheritance from his father and was forced to strike out on his own. His time as a stock trader of questionable legality helped him become an oil giant by 1913, thanks to his ability to trade his own Sinclair Oil stock for the properties of other oil companies.

The money Albert Fall received came in the form of Liberty Bonds. Despite his former position as a US Senator and de facto architect of New Mexico statehood, Fall was in some financial distress due to unpaid taxes on his ranch near Sierra Blanca Peak. With the money, he could pay off these taxes and make improvements to his run-down ranch. Unfortunately for Fall, his new spending did not go unnoticed in New Mexico.

Fall had expensive tastes, such as his mansion built in El Paso, Texas, and his 1906 purchase of the Three Rivers Ranch. He was an avowed conservative when it came to the economy and, as a legislator in New Mexico Territory, guided the state constitution to be one of the most conservative in the country. Corporations could easily access—critics would say exploit—New Mexico’s natural resources. Perhaps after years of politicking on behalf of railroads coming into the new state, Fall wanted some money for himself, especially after a hard upbringing on the frontier in the late 1870s and 1880s.

US Senate Investigation Into Teapot Dome

Unfortunately for Fall, Doheny, and Sinclair, the governor of Wyoming saw Sinclair Oil trucks driving onto the Teapot Dome lease with drilling equipment…and requested that US Senator John Kendrick (D-WY) look into it. Constituents in Wyoming sent Kendrick information that there had been backroom dealing regarding the oil leases. Kendrick managed to start an investigation in April 1922, though it began with little enthusiasm and was delegated to the committee’s most junior member. However, a few senators pressed on, even after seeing that President Harding himself had approved the oil leases.

While the leases themselves were legal, though highly controversial due to lack of public notice or bidding, senators quickly became suspicious of Albert Fall’s newfound wealth. One of the investigating senators, Robert La Follette, had his office ransacked, heightening his suspicions of a crime. In 1923, Fall resigned his Cabinet post and took a job with Franklin Sinclair, further intensifying suspicions of improper dealings between the two. That October, Fall testified before Congress that he had approved the drilling on grounds that it would improve US preparedness for a potential naval conflict against Japan.

Public interest grew as financial details didn’t add up. The $100,000 “loan” became a hot topic. Edward Doheny eventually testified before the US Senate that he had made the cash loan, though he insisted it was unrelated to the oil deal. By January 1924, Fall was refusing to cooperate further, insisting that he was both unwell and that Congress had no authority to compel him to testify. Harding’s replacement, Vice President Calvin Coolidge, was now chief executive and appointed special counsel to investigate the growing allegations against Fall, Doheny, and Sinclair.

In March 1924, Franklin Sinclair also refused to cooperate with Congress, insisting that only the courts could compel testimony. On March 31, 1924, a grand jury indicted Sinclair with contempt of Congress. The Senate investigation was completed with its report on June 6. This report led to criminal charges against Fall, Doheny, and Sinclair. In 1928, a weakened Albert Fall, suffering various health maladies, was called to testify in court against Sinclair.

1929-30: Justice Served?

In 1928, Franklin Sinclair was convicted of jury tampering for having private detectives follow the jurors of his and Fall’s October 1927 trial. He appealed but lost and was forced to serve a brief prison sentence. Fall went on trial again and was convicted on October 25, 1929 of accepting a bribe, though the jury asked the judge to show leniency due to Fall’s weakened condition. Fall became the first former Cabinet secretary in the United States to suffer a criminal conviction and be sentenced to prison.

Ironically, Doherty was acquitted of bribing Fall the following year despite the evidence being virtually identical. In July 1931, Fall finally traveled to Santa Fe, New Mexico to serve his sentence. He was released after ten months but refused to pay the $100,000 fine imposed. Despite the protection against double jeopardy (being charged again for the same crime after being acquitted), Doherty actually foreclosed on Fall’s ranch for alleged nonpayment of the $100,000 “loan.” This may have been an attempt by Doherty to protect his legacy.

The Teapot Dome scandal was a major blow to citizens’ trust in the federal government. Warren G. Harding’s letter approving the oil leases tainted his legacy, though there is no evidence that the president knew about the bribes. Many Americans viewed Harding’s cabinet as a corrupt institution, especially since Fall’s actions were so egregious. Although some of the legal stuff was complex, the bribery part was cut-and-dried corruption.

And it wasn’t just Albert Fall who made Harding and the rest of the cabinet look bad: the amiable but perhaps not-quite-competent-enough Harding was notorious for allegedly appointing too many friends from his “Ohio gang” into his executive branch. Harding liked these men personally, but they would unlikely survive a modern-day vetting process for cabinet posts. Several of them allegedly used their cabinet positions to help industries with which they were connected, today violating conflict of interest standards.

Reform: Laws & Supreme Court Rulings

Fortunately, some positive reforms emerged from the whole debacle. To better investigate alleged financial fraud, similar to what Albert Fall had perpetrated, the Revenue Act of 1924 gave Congress the ability to access any citizen’s tax records through the Internal Revenue Service. This makes it easier for congressional investigations to uncover fraud and is still a tool used by today’s congressional investigations into allegedly corrupt executives.

The US Supreme Court provided a final answer on whether Congress can compel testimony: yes. In Sinclair v. United States (1929), justices ruled that the US Senate did have the authority to compel Sinclair’s testimony, and thus, he was liable for refusing to testify. This significantly increased Congress’ oversight authority into the actions of executives. Today, citizens and bureaucratic agencies must testify before Congress under oath when called to do so. This helps maintain healthy checks and balances that keep US democracy (relatively) free of tyranny and corruption.